"The consequences for its own economic development will be felt for a long time to come."

The EU would do "everything in [its] power" to support the Spanish government's claim for full compensation, he added.

Argentine President Cristina Fernandez accused Repsol of having drained YPF since acquiring a controlling stake in the 1990s.

Her move against Repsol was popular among Argentines and the country's senate is expected to approve it on Wednesday.

Repsol has warned of possible legal action against companies or investors who help develop Argentinian resources that Repsol was working on, the Associated Press news agency says.

Nationalising YPF

Spain's Repsol has hitherto owned 57.4% of shares with 25.5% belonging to Argentina's Petersen, 0.02% to the Argentine government and 17% traded on stock exchanges

The Argentine government proposes to seize 51% of the shares, all of which will be taken from Repsol's stake, leaving the Spanish firm with 6.4%

The expropriated shares will in turn be divided between the Argentine government and provincial governors

Following the expropriation, Petersen will retain its 25.5% stake and 17% of the shares will continue to be traded

Spanish Foreign Minister Jose Manuel Garcia-Margallo told reporters on Monday: "I do not see what interest Argentina has in isolating itself from the rest of the world and closing its doors to investors.

"Argentina needs to get out of this situation. We are trying with our diplomatic efforts to explain that Argentina is working against its own interests."

A quarter of YPF is owned by Argentina's Eskenazi family through its firm, Peterson.

Repsol has said it wants around $10bn (£6.2bn) for its stake in YPF, but Argentina has said it does not accept that valuation.

YPF, Argentina's biggest oil company, was privatised in 1993. Last year it announced huge new finds of shale oil and gas.